Mortgage Terminology Explained
Mortgagor
This term refers to you, should you be the one acquiring the mortgage.
Mortgagee
The entity providing your mortgage.
Pre-qualification
This is a preliminary opinion on your borrowing capacity, given by a lender. However, keep in mind that some lenders might use pre-qualification as a marketing tool. For comprehensive advice, consider reaching out to Jamie Hooper.
Pre-approved
Being pre-approved carries more weight, as it provides a limit on the loan amount and is typically contingent on the property’s assessed value, a title search, and other property-specific factors. At several banks, pre-approvals are free of charge.
FHA and VA
These are government entities that provide programs to facilitate securing a loan.
FHA loans
The Federal Housing Authority aids individuals with lower incomes to purchase homes. FHA loans may offer smaller initial payments and potentially lower interest rates. Nevertheless, a conventional mortgage can be just as beneficial.
VA mortgage loan
If you are or were in the military, including being a military spouse, a Veteran’s Administration (VA) loan can be a helpful choice. The VA mortgages require no upfront payment but can be paperwork-intensive. However, we offer aid in initializing these applications.
Conventional mortgage
This is a mortgage not safeguarded by a government agency. Conventional loans can vary in cost, some being more expensive, others less so.
Conforming mortgage
These loans are within the constraints set by government-sponsored agencies, Freddie Mac or Fannie Mae, enabling you to secure a lower interest rate.
Freddie Mac and Fannie Mae
These are private companies underwritten by the government to ensure a steady supply of funds for mortgage loans.
Non-conforming mortgage (also known as a Jumbo loan)
This type of loan exceeds the directives put into place by Fannie Mae or Freddie Mac, leading to higher charges.
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Points
A “point” refers to one percent of the total loan, affecting the loan’s overall cost.
Assumable mortgage
These are mortgages that can be transferred or “assumed” under certain conditions.
Contingency clauses
These conditions need to be satisfied before a contract is enforceable.
Surveys
Surveys entail the investigation of the land and any permanent structures in place.
Appraisal
This is the valuation of property that banks trust when deciding on loan approval.
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Escrow accounts
These accounts store funds during the transaction process and the period following the sale.
Earnest money
This term signifies a down-payment, providing proof of the buyer’s sincerity.
Fully-indexed rate
This is the real cost of an Adjustable Rate Mortgage.
Teaser rate
This is an enticing starting rate that may inflate over time.
Prorations
These are fees that you may need to reimburse to the original owner.
Closing costs
These entail the various charges associated with finalizing a mortgage loan.
Closing
This is the final step of the mortgage process.
By acquainting yourself with these mortgage terms, you’re on your way to being an informed borrower.
For mortgage rate inquiries, feel free to request a FREE quote from Capwest Mortgage.
